Oil and Gas Industry Sectors: Midstream Sector

In the last blog post on the oil and gas industry, the topic of discussion was the upstream sector of the oil and gas industry- the first of three steps by which crude oil and/or natural gas is refined and treated until it reaches its final form. The midstream phase is next up in the process. It deals with a number of things, including the storage and wholesale marketing of crude oil and gas products; but perhaps the most important purpose lies in the transportation of oil and gas from the source to the refineries and production plants.

PIPELINES

Pipelines are the most common means by which the product gets from one place to another. Recent estimates suggest that there are over 2,170,000 miles of pipelines in operation around the world. The vast majority (really all but a small fraction of the total) are dedicated to the transport of oil and gas. 65% of the world’s pipelines are located in the United States. Pump stations along the path of the pipelines push the oil and/or gas through to ensure that it doesn’t clog and maintains a steady pace in its journey from the source to the destination. In order to keep the operation as safe as possible; there are systems in place to monitor the flow and temperature that will alert workers of any potential problems that need to be addressed. Additionally, inspectors will regularly examine the structural integrity of the pipelines and check for any cracks or flaws. The pipes used to carry oil are usually made from plastic or steel, whereas the ones that transport natural gas are constructed of carbon steel

PIPELINE INSTALLATION & GEOPOLITICAL FACTORS

Both oil and gas pipelines tend to be buried beneath the ground for the majority of their respective distance, but there are stretches that run at or above ground level in terrains in which it is problematic to keep them under the surface. Pipelines are generally the most economically efficient mode of transportation for gas and oil across land, but tanker ships are usually used to carry oil and gas across large bodies of water due to the high cost and technical complexity of running a pipeline underwater. Common difficulties in the implementation of a pipeline include geopolitical factors- since they often stretch across thousands of miles and through multiple countries, the diplomatic side of things can complicate matters. Other complexities like the distance of the pipeline itself, terrain, maintenance, and pumping are also components that have to be taken into consideration. Even though there are obstacles; 118,623 miles of pipelines are currently in the planning or building phase of construction, so it is clear that it isn’t a trend that will die in the foreseeable future.

OIL & GAS TRANSPORTATION

Tanker ships are probably the second most common mode of transportation for oil and gas. You’re not likely to miss the giant vessels if you’re ever around a major port or shipping route- they’re some of the largest ships in the world. The largest of these leviathans are sometimes called supertankers to distinguish There are two essential types of tanker ships. The first are specifically designed to carry crude oil, usually over a long open-sea journey from the source to the refinery. In terms of size, they usually range from 55,000 DWT {deadweight tonnage} to 450,000 DWT. Shipping routes for crude oil tankers often run from Saudi Arabia and/or West Africa to refineries in Europe, the Americas, and Asia. The other type of tanker{s} used in the industry to transport refined oil products and fuels {petrol, diesel, kerosene, jet fuel, fuel oil, etc.}. Commonly called product tankers, their shipping capacity is typically between 5.000 DWT and 80,000 DWT. While many other forms of cargo shipping are often compared to bus routes due to their relatively fixed route and schedule; oil tankers are more like taxi cabs, as they can take on new jobs and customers whenever they’re available. There are three basic sectors in the tanker industry- the charterer, the shipowner, and the broker. Charterers are the ones that need their product shipped in the most efficient and reliable way possible. As one might suspect, the shipowners own and operate the ship. They want to maximize the freight space of the vessel, but they are also careful to select clients that they expect to be reliable and able to pay for the shipping without any issue. Brokers are something of an intermediary between the charterer and the shipowner. They know both sides of the business well, and help lines of communication form between the chartering party and the shipowners.

Pipelines and tankers are certainly the two most common methods of transporting gas and oil, but there are others used for carrying the products over shorter distances. Trucks and trains are convenient modes of transportation in inland areas and places that don’t have immediate access to a pipeline. Additionally, they are tied in with another primary function of the midstream sector- storage facilities housing oil and gas products will often used trucks to move their product. The final line of work within the midstream industry is the wholesale marketing of crude oil and gas products. Companies like these will buy the crude oil and/or natural gas itself, and then sell it to the business that will refine it and craft it into its final form.

SUMMING UP THE MIDSTREAM SECTOR

So the midstream sector of the oil and gas industry entails the transportation, storage, and wholesale marketing of the crude oil and natural gas. Transportation is the largest of the three functions, and pipelines are the most common and efficient way of transporting oil across land; while tanker ships are the preferred mode of transportation across large bodies of water. Trucks, trains, and other land vehicles can also be used over shorter distances. There are dedicated facilities that store the oil after it is shipped and before it reaches its final destination, and other firms are in the business of buying and selling the unrefined gas and oil. Following the midstream phase comes the downstream end, which is centered around the refining and purification of the raw oil and gas into the end products such as fuels. The next blog in this series will cover the downstream industry in more detail, assessing the nature of the refining process.